What Is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is a key part of the government’s plans to make it easier for individuals and businesses to get their tax correct and keep on top of their affairs
The first phase of Making Tax Digital happened in April 2019, when VAT registered businesses with turnover greater than £85,000 had to submit VAT returns digitally.
From 1 April 2022, all VAT registered businesses will have to submit their VAT returns via an approved software platform.
How Will This Affect Your Business?
You will no longer able to keep manual VAT records and submit your VAT return by inputting data into the government gateway. Instead, HMRC will only accept VAT returns sent using software that supports Making Tax Digital for VAT.
The first VAT returns to be affected will be month ended 30 April 2022 (monthly VAT returns) or quarter ended 30 June 2022 (quarterly VAT returns).
There may be a some set up time required but done worry, once you’re up and running, it will be easier to submit VAT returns using online MTD software.
The Advantages Of Making Tax Digital
The advantages of Making Tax Digital include,
- The new software will save you time as there will be less paperwork.
- Access to management information at the touch of a button.
- Real time, up-to-date information with fewer errors.
- Reduced stress when it comes to submitting tax returns.
At RB+ we specialise in the latest digital software and solutions. We can work with you and your business to ensure you are ready for the switch. Our certified advisors offer all the necessary training and support you may need in preparation for the next stage of MTD.
Do I Have To Sign Up & What Are The Exemptions?
You can claim an exemption if it is not practical for you to keep records digitally due to location, religious reasons or a disability. You must apply to HMRC for an exemption.
If you fail to submit under the Making Tax Digital requirements, the penalty could be £400
HMRC have announced that a new penalty regime will be introduced in January 2023, one for late filing and the other for late payments.
The RB+ Guide To MTD In 10 Simple Steps
- Don’t panic, speak to the team at RB+ if you need some professional advice, we are here to help!
- Make sure your current software is compatible with Making Tax Digital (MTD).
- If you currently maintain your accounts manually, we will need to work together to get them moved into a digital format.
- Prepare for submission by gathering the following details,
- Business e-mail address,
- Government Gateway ID and password,
- VAT registration number,
- Your latest VAT return,
- National Insurance Number or Company Registration Number,
- Unique Taxpayers Reference (UTR) and
- Address & Postcode.
- Sign up for Making Tax Digital (MTD).
- Obtain confirmation of your registration.
- Speak to RB+ once you have steps 1 – 6 complete!
- Configure the MTD component on your digital system.
- Link your software to your government gateway.
- Submit your return digitally & save your confirmation
In the last few months, the team at RB+ have conducted in-depth VAT reviews for selected clients in preparation for MTD. VAT is quite complicated for many businesses. Our specialist reviews have resulted, in some cases, significant reclaims from HMRC. Among other things, this could mitigate the likelihood of additional VAT being assessed against you in future, should you be subject to a VAT investigation from HMRC.
When was the last time you had a VAT review? There is no better time to review everything together with the introduction of MTD. Contact the team at RB+ if you have any doubts or queries about accounting for VAT and we can set some time aside together to work through your enquiry together.
What Does The Future Hold For Making Tax Digital?
Making Tax Digital for VAT is the first stage of the government’s digitalisation plan. As noted above, HMRC aim is to have all tax filings digitalised. Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from 6 April 2024. More on this to follow in the next few months.